The Rise of China’s Mega Tour Groups

StefanMay 23, 2015

All-expenses-paid trips to reward top sales people aren’t unusual, but direct marketing companies that are the Chinese versions of Amway, Avon and Herbalife are taking it to an extreme by sending thousands abroad on package tours.

One company is sending 12,700 salespeople to Thailand on a tour that continues until next week. The Infinitus herbal supplement company has outfitted the sales representatives with uniforms, the same luggage and even the same umbrellas.

Earlier this month, a medicinal products group sent 6,000 of its representatives to France where they set a world record by massing the most people to spell out a phrase that included their own firm’s name. Last year, Nu Skin China sent about 14,500 employees on a 10-day jaunt to the UAE — weeks after it was stung by a US$500,000 fine. Another sent 7,000 to California.

“We are making history!” vice-chairman Xu Guowei of the Perfect China cosmetics company crowed in California during the retreat and package tour. “We have taken 86 flights, stayed in 26 hotels,” he said. “Our group’s attendees have spent US$10,000 each this visit.”

The tours are at the intersection of several trends in a country with a predilection for package trips: an explosion in overseas travel, surging national pride and the phenomenal growth in the past decade of direct sales companies. The companies are splashing cash and seeking publicity following a period in which they were banned as pyramid schemes.

But they have also generated debate among Chinese who have become increasingly sensitive to how they are perceived overseas. Some see the tours as tacky ploys by the quasi-evangelical companies to entice new sales representatives to expand earnings.

China’s direct sales market began with the entry of Avon in the 1990s. But the industry plunged into chaos with rampant pyramid schemes, prompting the government to ban the industry altogether in 1998. The ban was lifted in 2005.

Direct selling cuts out shops to sell products or services directly to consumers, using teams of sales personnel who typically get most of their income from a cut of the sales.

Since the ban was lifted, direct marketing has expanded rapidly, with an average annual growth rate of 30 per cent. China’s direct sales market is likely the world’s third or fourth biggest behind the United States, Japan and possibly South Korea, said Hu Yuanjiang, executive director for direct selling at China Health Care Association.

After 2005, the industry grew to employ 2.3 million salespeople within seven years. In 2012, the country had 32 licensed direct marketing companies with combined sales of nearly 20 billion yuan (Dh11bn), according to the Chinese Commerce Ministry.

The growth can be attributed to China’s economic boom, a rising consumer culture and more favourable government policies, and also that direct selling provides low-threshold opportunities for people to start their own businesses, Mr Hu said.

“It also fits into the Chinese culture, where kinships and personal relationships, such as being in the same class or from the same village, are highly valued. They help build trust quickly, which is important for direct selling,” Mr Hu said.

Nu Skin’s visit to the UAE helped Abu Dhabi post record quarterly visitor numbers. Perfect China’s tour of California last year reportedly generated US$85m in revenue for the local economy, and Anaheim Mayor Tom Tait wished them great memories.

The Tianjin-based Tiens Group, which sells medicinal products, including via direct marketing, sent 6,000 employees on a four-day, all-expenses-paid trip to France to celebrate the company’s 20th anniversary. They formed the phrase “Tiens’ dream is nice in the Côte d’Azur” on the waterfront in Nice. The French foreign minister met with the company president.

Infinitus is sending 12,700 sales associates to Thailand in shifts of two to three thousand for six-day trips to Bangkok and the beach resort of Pattaya. They are taking 110 flights and shuttling in 400 coach buses until Tuesday. Thai tourism officials expect $18m in revenue.

The three mass tours have generated media buzz not only in host countries, but back home where some Chinese see them as part of their country’s rise on the world stage. They relish the big spending and the warm welcome from host cities.

The tours also have drawn sneers for their ostentation at a time when Chinese tourists are gaining a reputation abroad for showiness and rudeness. China’s National Tourism Administration has created a new black list to shame tourists who misbehave while travelling.

Hu Xingdou, an economics professor at Beijing Institute of Technology, said the mass tours reflect the desire of Chinese to show off wealth after decades of impoverishment, while the uniforms and shouting of slogans reveal the oddly militaristic corporate culture of China’s direct marketing companies.

“It’s also about brainwashing and instilling loyalty in the salespeople,” Mr Hu said.

Zhang Xiaoyan, a senior business director at Infinitus who went on one of the Thailand trips, recalled local people “gaping” at the travellers who were wearing uniforms, lugging suitcases and carrying umbrellas — all with the company logo.

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All-expenses-paid trips to reward top sales people aren’t unusual, but direct marketing companies that are the Chinese versions of Amway, Avon and Herbalife are taking it to an extreme by sending thousands abroad on package tours. One company is sending 12,700 salespeople to Thailand on a tour that continues until next week. The Infinitus herbal supplement company has outfitted the sales representatives with uniforms, the same luggage and even the same umbrellas. Earlier this month, a medicinal products group sent 6,000 of its representatives to France where they set a world record by massing the most people to spell out a phrase that included their own firm’s name. Last year, Nu Skin China sent about 14,500 employees on a 10-day jaunt to the UAE — weeks after it was stung by a US$500,000 fine. Another sent 7,000 to California. “We are making history!” vice-chairman Xu Guowei of the Perfect China cosmetics company crowed in California during the retreat and package tour. “We have taken 86 flights, stayed in 26 hotels,” he said. “Our group’s attendees have spent US$10,000 each this visit.” The tours are at the intersection of several trends in a country with a predilection for package trips: an explosion in overseas travel, surging national pride and the phenomenal growth in the past decade of direct sales companies. The companies are splashing cash and seeking publicity following a period in which they were banned as pyramid schemes. But they have also generated debate among Chinese who have become increasingly sensitive to how they are perceived overseas. Some see the tours as tacky ploys by the quasi-evangelical companies to entice new sales representatives to expand earnings. China’s direct sales market began with the entry of Avon in the 1990s. But the industry plunged into chaos with rampant pyramid schemes, prompting the government to ban the industry altogether in 1998. The ban was lifted in 2005. Direct selling cuts out shops to sell products or services directly to consumers, using teams of sales personnel who typically get most of their income from a cut of the sales. Since the ban was lifted, direct marketing has expanded rapidly, with an average annual growth rate of 30 per cent. China’s direct sales market is likely the world’s third or fourth biggest behind the United States, Japan and possibly South Korea, said Hu Yuanjiang, executive director for direct selling at China Health Care Association. After 2005, the industry grew to employ 2.3 million salespeople within seven years. In 2012, the country had 32 licensed direct marketing companies with combined sales of nearly 20 billion yuan (Dh11bn), according to the Chinese Commerce Ministry. The growth can be attributed to China’s economic boom, a rising consumer culture and more favourable government policies, and also that direct selling provides low-threshold opportunities for people to start their own businesses, Mr Hu said. “It also fits into the Chinese culture, where kinships and personal relationships, such as being in the same class or from the same village, are highly…

The Rise of China’s Mega Tour Groups

The Rise of China’s Mega Tour Groups

2015-05-23

Stefan

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Stefan (from Austria, Europe) has been living, studying and working in China since 2010. Stefan has worked on several research, publication and consulting projects focusing on the China Travel Market. He holds two Masters degrees and is an expert on China Outbound Tourism, Marketing and Social Media in China. Stefan works with BMG on the Global Ready China Seminars as well as the Global Ready China News and related projects. He also has teaching engagements in the areas of eMarketing and Tourism Strategy.